Our View: Free market could change insurance

Published: Friday, March 29, 2013 5:30 a.m. CDT

With changes laid out in the federal Affordable Care Act (widely known as “Obamacare”) set to start affecting more Americans in 2014, there have been whispers that this employer or that one is considering dropping the health insurance benefits it offers to employees.

In the coming years, many companies might indeed find it cheaper to pay a penalty of $2,000 a worker and stop offering insurance benefits, leaving employees to fend for themselves.

It’s a scary thought for many working people whose health benefits come from their employer. But it could be fear of the unknown as much as anything.

With the federal health exchanges in their infancy, perhaps 2014 isn’t the ideal time for the market to be flooded with newly uninsured people. However, if in the future many workers received the value their employers now contribute to their health plans as cash wages – or a stipend – and were turned loose on the open market, it could bring about positive changes.

If consumers find that staying in shape, quitting smoking or other healthy habits can save them money on health insurance, they’ll be more inclined to take responsibility.

Doctors might become less likely to order redundant or unnecessary procedures, lest they risk losing patients.

The fights with insurance companies over what constitutes necessary treatments could also diminish, and insurers might be forced to place more emphasis on healthcare consumers and less on their bottom lines.

In other words, having the freedom of choice could give American consumers the same leverage they have in most other markets today.

When consumers are given a choice – rather than having their employers make it for them – they tend to demand the best, most cost-effective service. Health care providers and insurers would become more accountable to the free market than ever before.

There could be other benefits. Consumers could be free to choose the health insurance plan that works best for their particular situation, rather than being forced to choose among plans offered by their employer. Given that many people already purchase life, auto and other insurance coverage, they could add their health plan to their buying power as consumers.

Think about the markets for life and auto insurance for a moment – consumers have many options, from large, national brands to regional companies that serve a specific niche of the population.

It seems likely that added competition could have a similar effect on the health insurance marketplace.

Certainly, this kind of change might seem dramatic.

But forcing insurance companies to compete for individuals’ business on a national scale, although it sounds scary for consumers, could also prove transformative.